Microsoft's Xbox 360 was the first to market in the
"next generation" console race and is leading in total sales so far.
Nintendo's Wii has been selling at a breakneck pace in the United States, but
the Xbox 360 has held a comfortable lead over
the Sony PlayStation 3.

But there is one pitfall that Microsoft has not been able to
get away from with regards to the Xbox 360: the infamous Red Ring of Death
(RROD). The RROD has been the perennial thorn in the side of the Xbox 360.

In September of 2006, Microsoft offered free repairs to
customer that purchased Xbox 360 consoles manufactured before
01/01/2006. Microsoft noted that the reason for the generosity was due to
"higher than usual number of units coming in for repair."

Three months later in December 2006, Microsoft decided to boost the Xbox 360's
warranty to a full year. Customers who had already paid for repair service
were mailed checks for the full repair costs by Microsoft. "Customer
satisfaction is a central focus and priority for the Xbox 360 system,"
said Jeff Bell, corporate VP of Global Marketing for Microsoft's Interactive
Entertainment Business at the time of the announcement.

Despite Microsoft's best efforts, Xbox 360s afflicted with
the RROD continued to roll in for service. In April 2007, the company decided
to bulk up its
warranty services by offering free shipping for consoles in and out of
warranty. Microsoft also announced that customers who sent in consoles under
warranty would receive an additional 90 days of warranty service -- in addition,
consoles that were sent in for service when out of warranty would be returned
with a fresh one-year repair warranty.

At the time, the company also announced faster repair times
for consoles (within five business days) and the addition of more staff to
handle customers’ needs.

All the while, Microsoft remained mum as to the actual
problems with the Xbox 360 and declined to give a
failure rate for the console. In May, Microsoft's Peter Moore said that “I
can’t comment on failure rates, because it’s just not something-- it’s a moving target. What this consumer
should worry about is the way that we’ve treated him. Y’know, things break, and
if we’ve treated him well and fixed his problem, that’s something that we’re
focused on right now."

Most had speculated that the problems related to Xbox 360s
becoming afflicted with the dreaded RROD was because of lead-free solder joints
on the GPU and poor cooling within the case. Xbox 360 consoles with upgraded cooling
hardware began appearing in Europe in early June. Microsoft responded with
"no comment."

Earlier this week, DailyTech
reported that the failure rate for the Xbox 360 was as high as 33 percent
according to some retailers -- Microsoft had previously stated that the failure rate for the Xbox 360 was in the three to five percent range. “The real numbers were between 30 to 33
percent,” said former EB Games employee Matthieu G. “We had 35 Xbox 360s at launch. I know
more than half of them broke within the first six months (red lights or making
circles under the game discs). Two of them were dead on arrival.”

The RROD problem is so bad that some companies
have even refused
to repair the console. “This problem is endemic on the
Xbox 360 console and the volume has made this repair non-viable," said Micromart, a UK-based game console repair company. “The work we had done to the console lead us to believe that
basically it was a fault with the motherboard and not something that could be
resolved easily. And it wasn't going to go away,” continued Micromart's Jeff Croft.

Although it doesn't appear that Microsoft has made any
changes to stop the Xbox 360 from coughing up the dreaded RROD, the company
announced today that it will
set aside $1 billion USD to fix "an unacceptable number of
repairs."

"This is just one of those things that happens when it
happens," said Microsoft entertainment and devices division president
Robbie Bach. "We reached our conclusion early this week and because it's a
financially meaningful issue we had to announce it immediately."

Peter Moore
remarked that "The majority of customers who own Xbox 360 consoles
have had a terrific experience from their first day, and continue to, day in
and day out." He was also humble enough to admit that "Some of you
have expressed frustration with the customer experiences you have had with Xbox
360; frustration with having to return your console for service after receiving
the general hardware error message on the console."

As a result, Microsoft is extending warranties of Xbox 360s
afflicted with the RROD to three years from the date of purchase. The company
will also retroactively reimburse repair costs for anyone that sent in their
Xbox 360 for the RROD.

"In doing so, Microsoft stands behind its products and
takes responsibility to ensure that every Xbox 360 console owner continues to
have a fantastic gaming experience," said Moore. "If we have let any
of you down in the experience you have had with your Xbox 360, we sincerely
apologize. We are taking responsibility and are making these changes to ensure
that every Xbox 360 owner continues to have a great experience."

Microsoft’s generosity is commendable, but until the actual
cause of the problem is identified and taken care of, this may all be for
naught.

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This article is over a month old, voting and posting comments is disabled

Assuming Microsoft has fixed the problem, or at least drastically cut it's incidence, and accurately knows it's true defect rate, it should last until the last of any sold units are out of warranty. If for someone reason their calcs are off, they mint enough money to make up any difference.

The one thing to bring from the 1.15 billion is the 3-5% defect rate is very underreported. Take the high end at 5% that would be 580,000 units to fail or expected to fail(there are working units that at some point will fail), 1.15 billion for repairs would come out to nearly $2000 per unit. Not very plausible.

"Nowadays, security guys break the Mac every single day. Every single day, they come out with a total exploit, your machine can be taken over totally. I dare anybody to do that once a month on the Windows machine." -- Bill Gates